I previously mentioned that by 2020 Japanese direct investment into Australia reached $131.8 billion and regained its position as the second highest source. What I omitted was that in the year 2020 Japan was the biggest source of FDI inflow, despite Japanese companies facing the same challenges that all multinationals had to endure.

It is difficult to predict what the investment flow has been in 2021 but numerous activities and drivers have been interacting to give us great confidence about future trends. Some of these have been ably addressed by the various webinars and seminars that JETRO and the AJBCC have organized: Circular Economy, Critical Minerals, Open Innovation, Net Zero and Carbon Neutrality, Infrastructure, Western Sydney, Hydrogen and Ammonia. This list may be small but it covers multi-billion dollar industries.

All of these sectors and opportunities overlap and support each other, providing a new solid foundation on which Australian and Japanese companies can partner to achieve long term wealth creation again. I write “again” because we have done this before. Soon after the signing the 1957 Commerce Agreement, the unique investment and commercial collaboration between Australia and Japan in iron ore, coal and LNG literally changed the world, producing massive industries and generating economic miracles for both countries and for our region. 

I would not say that Australia and Japan are on the cusp of massive new opportunities. I would rather say that we are accelerating together towards those opportunities, in new energy frontiers for production and storage, in hydrogen, in the critical minerals that will be needed to reach net zero carbon and in secure alternative supply chains that will once again change the world.

There are good reasons to have such outsize optimism. The previous massive economic partnership was based on an almost perfect complementarity of energy and resources with capital and manufacturing production. These fundamentals are in place again thanks to Australia’s boundless reserves of so many key resources. For example, Australia is the number one producer of lithium in the world, the second largest producer of zirconium and rare earths and top five producer of cobalt, manganese and titanium and the list goes on. Australia also has an important enduring advantage: the political stability and transparent governance of an advanced economy. Many of the other sources of these critical inputs are in locations with much higher risk profiles.

Both Australia and Japan face the enormous challenge of net carbon zero and its impacts on traditional sources such as coal and gas, which will have flow on effects on price competitiveness and on the communities that have relied on these industries for decades. Adjustment and success will require investment, commitment and innovation, three ingredients which are supported by the unequalled strength of trust between Australia and Japan.

Much of 2021 has been about exploring these new opportunities, doing feasibility studies, signing non-disclosure agreements, finding partners, etc. From 2022 these activities will yield a burst of new investment and collaboration.

Author: Manuel Panagiotopoulos

Managing Director, Australian and Japanese Economic Intelligence